International expertise becoming mandatory for CEOs of major European corporates, finds research

Demand for CEOs with international expertise has soared in the past decade, with two-thirds (66%) of CEOs of the 100 largest European companies now boasting overseas experience, up from just 60% in 2006, reveals research from DHR International.

DHR International explains that there has been a shift amongst European companies over the last 10 years towards increasingly targeting CEOs with experience working overseas. In many cases, shareholders now view overseas experience as a vital asset during succession planning.

DHR International adds that with an increasingly globalised marketplace, European companies are looking to ensure that the individuals at the very top of the business have a wealth of experience in overseas markets in order to target fast-growing markets.

Frank Smeekes, managing partner of Europe at DHR International, said, “Overseas expansion is vital when the European economy is growing so slowly. However, poorly executed international expansion has proved to be an expensive process for many European companies, highlighting the importance of CEOs possessing practical overseas expertise.”

DHR International adds that Europe’s largest companies are now also more open to the idea of hiring foreign-born CEOs, as the proportion of home-grown CEOs dropped from 78% in 2006 to 63% this year.

The research from the company also finds that the proportion of the FTSE 100 with home-grown CEOs has dropped from 71% in 2006 to 60%, as UK companies look to ensure they have people with greater international experience at the helm.

By contrast both French and German companies have increased the proportion of CEOs from their own countries. In France, 90% of CEOs in the CAC 40 are French nationals (up from 85% 10 years ago) whilst in Germany for the DAX 30 the figure has also risen from 77% to 80% over the same period.

In the Netherlands the number of CEOs with overseas experience has remained high, increasing slightly with 9 out of the 10 biggest Dutch companies employing CEOs with international experience as opposed to 8 in 2006. However, the number of home-grown CEOs increased, with 7 Dutch CEOs in 2016 compared to 3 ten years ago.

DHR International explains that UK companies often have a more diverse range of international stakeholders than many of their European competitors so it is more important that CEOs in the UK have overseas experience and full knowledge of the globalised market in order to fully understand the wide range of issues affecting and influencing all shareholders.

The latest figures show that 53.8% of UK company shares are owned by overseas investors, up from 43.4% in 2010. This is compared to 45.3% of French companies’ shares that are owned by foreign investors, according to the Banque de France.

Smeekes commented, “Overseas expertise is now one of the most assets that stakeholders look for when they’re searching for board members and the next CEO.

“Due to the larger proportion of international shareholders, CEOs of UK companies, in particular, need to possess experience in overseas market. In those countries where companies have a higher level of local stakeholders, such as France, this requirement is reduced.

“In French companies, there are other skillsets that are equally or more highly sought-after. For example, the French Government seeks to exert more influence over businesses in France than is the case in the UK. CEOs in France may therefore need to be more adept at communicating and dealing with the Government than their UK counterparts.

“In Germany, there is a tradition of drawing board membership from the regional economy, which may include representatives from regional government, union groups and regional banks. Again, the ability to be able to deal with and communicate successfully with such representatives is more important than in the UK, so overseas experience does not have the same priority as in the UK.”